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What is the HP v Autonomy trial about?

Back in 2011, the US tech company HP acquired a Cambridge-based software company, Autonomy in a deal that valued the UK company at $11.1bn.

Mike Lynch, founder of Autonomy, was credited as building the UK’s most successful software company and was kept on to lead the new division.

Even then, it was seen as a controversial move. The deal was price was as seen as high, something many HP shareholders found excessive at the time. Concerns over the price led to HP’s stock falling soon after it was announced.

In addition, a week before the acquisition confirmation, it was revealed that Oracle had been approached about the deal too. The company’s chief executive, Larry Ellison, said he had no interest in the deal because of its “absurdly high price”.

HP’s chief executive at the time, Leo Apotheker, was fired by HP’s board soon after the controversial deal was announced.

Only a year after the acquisition, there was an $8.8bn impairment charge in HP Autonomy’s accounting. As the parent company, HP said it was “Autonomy’s accounting improprieties” at fault.

HP accused Lynch of inflating the revenues of Autonomy by about $700m over a two-and-a-half year period. The company’s chief financial officer, Sushovan Hussain, is also implicated in the charges.

There is more than one HP v Autonomy trial

This month’s HP Autonomy trial is brought by the US department of justice against Hussain. He pled not guilty to the federal charges last year.

“Sushovan Hussain is innocent of wrongdoing. He defrauded no one and, as Autonomy’s CFO, acted at all times with the highest standards of honesty, integrity and competence. He will be acquitted at trial.

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“It is a shame that the department of justice is lending its support to HP’s attempts to blame others for its own catastrophic failings. Mr. Hussain is a UK citizen who properly applied UK accounting rules for a UK company. This issue does not belong in a US criminal court.”

Keker is well known for his celebrity clients, including Lance Armstrong and George Lucas.

However, there are other cases in the HP Autonomy saga. HP is suing Lynch and Hussain in a $5bn fraud case that is expected to go to trial next year. The US company is claiming that Lynch and Hussain breached their fiduciary duties as directors. As well, it claims Lunch breached his contractual duties as an employee of Autonomy and Hussain repeatedly misled the Autonomy audit committee.

In response, Lynch is counter-suing HP in the UK for $150m in damages. This is for “statements that were highly damaging to me and misleading to the stock market,” according to Lynch.

But the UK dropped its investigation

Following the US department of justice investigation, the UK’s Serious Fraud Office launched its own investigation into Autonomy’s accounting practices. However, it closed it in 2015 without any charges. At the time, it said it had ceded “aspects of the investigation” to US authorities.

“We welcome the SFO’s decision to close its investigation. As we have always said, HP’s allegations are false, and we are pleased that after a two-year review of the material presented by HP, the SFO has concluded that there is not a case to pursue.”

What’s going to happen next?

What is interesting is that Lynch hasn’t been charged in the US federal case, which is going to trial this month. According to The Guardian, sources that prosecutors may be hoping to pressure Hussain into turning against Lynch and providing evidence that could prosecute him.

Meanwhile, The Times reports the US government has filed a list of 70 witnesses it may call on during the trial. This includes Apotheker, the former HP chief executive. The tech banker Frank Quattrone, who advised Autonomy on the deal, is on the list as well.

It’s nearly seven years since HP acquired Autonomy and the drama has been rolling on since then. The trial on 24 February is only the next stage in the battle between the US company and Autonomy’s former executive team.

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